The US says consumers keep spending. Dollar General says otherwise.

Good morning investors. Keep an eye for July’s PCE data due at 8:30 a.m. ET this morning. Market folks call this one the Fed’s preferred inflation gauge.

Analysts expect the headline figure to hold steady at 2.5% annually, while core PCE — which strips out energy and food — is seen inching higher from 2.6% to 2.7%.?

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Private vs. public sector signals

No single data should tell the entire story of a complex economy.

It’s worth unpacking, however, when signals from the public and private sectors are pointing in opposite directions.

On Thursday, the Bureau of Economic Analysis reported that the US economy grew at a slightly stronger clip than previously thought.

US GDP rose at 3.0% annualized in the second quarter, revised from the previous estimate of 2.8%.?

A driver of that strength, according to the government, was robust consumer spending.

The initial 2.3% print for consumer spending was revised higher to 2.9%.

The economic data published right at the start of Dollar General’s worst day ever for its stock.?

Shares plunged 32% Thursday for its largest drop since its IPO in 2009.

The budget retailer slashed its expectations for sales the rest of the year, citing concerns around economic growth and —?you guessed it —?consumer spending.?

Painfully high prices for goods, rent, and healthcare have weighed on everyday Americans.?

“Inflation has continued to negatively impact these households, with more than 60% claiming they have had to sacrifice on purchasing basic necessities,” chief executive Todd Vasos said on a call with shareholders and analysts.

The company previously forecasted comparable sales to climbed as much as 2.7% for 2024. Executives have since revised that down to between 1 to 1.6%.?

Shares of competitor Dollar Tree also tumbled 10% on the news.?

“Dollar General’s reduced forecasts for full-year revenue, same-store sales and diluted EPS may indicate its back-to-basics plan isn’t yet resonating enough with lower-income households that remain financially constrained,” said Bloomberg Intelligence analysts Jennifer Bartashus and Jibril L. .

To be clear, comparing a GDP report with one company’s earnings outlook is not an apples-to-apples comparison.?

Nonetheless, it highlights the disparity between the official and anecdotal, as well as public and private.?

Notably, too, the Dollar General outlook is built around the behavior of consumers with more limited budgets.

One other conclusion, then, is that lower-income Americans currently have a bleaker economic outlook than the typical household might.?

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